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Experimental Comparison of Multi-Stage and One-Stage Contests

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  • Roman M. Sheremeta

    ()
    (Argyros School of Business and Economics, Chapman University)

Abstract

This article experimentally studies a two-stage elimination contest and compares its performance with a one-stage contest. Contrary to the theory, the two-stage contest generates higher revenue than the equivalent one-stage contest. There is significant over-dissipation in both stages of the two-stage contest and experience diminishes over-dissipation in the first stage but not in the second stage. Our experiment provides evidence that winning is a component in a subject’s utility. A simple behavioral model that accounts for a non-monetary utility of winning can explain significant over-dissipation in both contests. It can also explain why the two-stage contest generates higher revenue than the equivalent one-stage contest.

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Bibliographic Info

Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 09-04.

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Length: 33 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:chu:wpaper:09-04

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Keywords: rent-seeking; contest; contest design; experiments; risk aversion; over-dissipation;

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